86 CAS Ops: Stop Reconciling to the Penny

📉 Stop Reconciling to the Penny: Why Materiality Matters in CAS | CAS Minute

Are you still chasing down every last 2¢ discrepancy? In this episode of CAS Minute, Roman Villard challenges one of accounting’s sacred cows: penny-perfect reconciliations. Learn why directional accuracy, materiality, and decision-useful data are far more valuable than perfection — and how to shift your team’s mindset to prioritize client outcomes over spreadsheet symmetry.

⏱️ Chapters

00:45 – Precision vs. Accuracy: What Clients Actually Care About

03:00 – What Clients Really Want: Fast, Directionally Accurate Insights

05:30 – Building Materiality Thresholds Into Your Firm’s Processes

06:00 – How to Train Your Team on Materiality vs. Perfection

✅ Key Takeaways:

• Precision isn’t always valuable. Aim for material accuracy that supports decision-making.
• Chasing pennies wastes margin. Focus on where your time adds the most client value.
• Materiality matters. Learn to set thresholds based on client size and scope.
• Train your team. Stop reinforcing the myth that perfection equals professionalism.
• Challenge assumptions. Ask clients what they actually expect—then deliver accordingly.

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Full Send | Accounting & Data

LinkedIn: Roman Villard, CPA
X: @FullSendCPA
YouTube: Full Send - Accounting & Data
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Transcript

​And welcome to another episode, a long overdue episode of CAS Minute. Um, today I wanted to jump into a topic that I've been pressing into my team over and over and over again this year, and that really is just the concept of materiality. We should not be reconciling to the penny. If we're doing that, we're solving the wrong problem.

You know, what we tend to do is look at our, our precision as a sign of quality and, and really I think it kind of gives us a false sense of control. And so we want to challenge one of accounting's sacred cows, and that's the obsession with penny Perfect reconciliations. So many CAS professionals conflate precision with accuracy and ya know.

That mindset costs time, it costs profitability, it costs trust. And so let's explore like what clients actually care about. How do we shift our firm standards to what matters? And then let's start to make sense of things that may actually, be worthwhile to reconcile to the penny. If you're spending hours tracking down that 3 cent variance, your client's sitting there waiting on insights to drive the business forward and waiting on you to track down that thing, that really isn't gonna move the needle. So what's more valuable, let's kind of punch a hole in the idea that reconcile the penny isn't really the gold standard anymore.

if I've had a chance to meet you, I'm Roman Villard I run a firm called Full Send, and we've reconciled tens of millions of dollars in client accounts, and I found that time and time and time again. Clients don't care about that Penny. They don't care about that $20 transaction. They want decision useful data.

So let's talk about that. Now when we think about the concept of precision versus accuracy, uh, precision is the exact number down to the cent accuracy is, are we correct enough to support the right conclusion? So you get to a point of a confidence interval to say, we are materially.

Accurate. The financials depict an accurate view of what's happening in the business. Now, we may be off a few dollars here or there, but this is good enough to help make decisions. Most clients like they wanna know, am I profitable? How much cash runway do I have? They don't really care about the 2 cent variance in stripe.

In your reconciliation on the backend, that's not even delivered to them. It's kind of like the the, the GPS, right? Like. It doesn't need to know what side of the road you're driving on. It just needs you to continue making progress towards that destination. So if you're on the left hand side of the road versus the right hand side of the road, it doesn't really matter to the GPS that's trying to send you towards your destination.

Now another key point here is that penny reconciliation is a cost center. So in a CAS practice, time equals margin. If your team spends 45 minutes chasing down an immaterial variance, you know, you could be losing quite a bit of profitability there. Now conversely, if you're billing that time to the client.

If I'm sitting in the client's shoes and I, I see what you're spending time on, I'm not gonna be too happy about that. But what happens though is like the, the mindset of perfection, the mindset of precision, it trickles down to the team as perfection equals value, when in reality it doesn't, and clients don't really care about that.

So don't waste like your senior accountant's time on, on that math homework of trying to get it. Precisely correct. The clients don't care about that. So what do the clients actually care about? They want insights. They want directional accuracy. They want information when it's available, ideally in an expedited timeframe, uh, to help them make decisions.

So why is gross margin trending down? Uh, are we on track for our next fundraise? Can I afford to hire a salesperson next quarter? So a report that's 98% accurate and delivered more quickly is more valuable than a 100% reconciliation that arrives late. Let's talk about that again. A report that's 98% accurate, but delivered more quickly is more valuable than a 100% accurate reconciliation that arrives late and often is the thing that prevents us from delivering financials on time and or early.

So when does that Penny Perfect financial or reconciliation matter? Are you closing the books for an audit? Yeah, we need to get pretty close. It's still important to look at it through the lens of materiality as an auditor would, but it matters. So we wanna make sure that our accuracy threshold increases if you're closing the books for an audit or a tax return.

So for compliance related items, yes. This is tremendously important. Are you a, a regulated industry that requires government reporting, um, that requires some degree of external or third party stakeholder reporting? You probably need to get a little bit tighter on what your acceptance interval is for any deviations against materiality.

Are you creating accrual financials to support a valuation? Again, we need to tighten that threshold a bit. Are you sending weekly internal updates or interim dashboards? We probably need to then focus more on being directionally correct and not micromanage that precision. We know that if you're sending more regular daily, weekly updates, that there will likely be month-end close adjustments to those figures.

And so what we wanna focus on in that type of report is gonna be directional. Accuracy, but there are still instances where precision is tremendously important. So we gotta really start focusing on with our team, how do we shift our internal standards and not make it, you know, penny perfect by default, but establish materiality thresholds.

That makes sense. You know, you can easily go through an exercise on, on chat GPT in Excel to calculate out what is the kind of materiality. For our clients that make sense? And I would generally recommend to go through typical audit materiality calculation type exercise to figure out what a tolerable misstatement would be, what a transaction misstatement threshold would be, and then train your team on that.

Ask your team, is this variance decision useful? Will the client actually change their behavior? If we go down to this level of detail, you know, if you can start to build that into your reviews, build that into your feedback to, to flag patterns and not just like hunting down these pennies, you start to shift how your team thinks about it.

moving forward, if you can audit, eh, internally, audit, your last couple of financial reviews where your time is being spent, can you figure out like. Is your team spending time on the things that actually move the needle for your clients, or are they spending time on chasing those immaterial differences?

You can start to set those materiality thresholds like we talked about, and then start to train your team on how to prioritize more decision useful work over what I would characterize as busy work, chasing those pennies down. That training can take place in a very quick all hands meeting. 30 minutes.

You walk through the methodology, you walk through a couple of client examples, and then start to plant that seed as to how and why it's so important. It is super important for your team to align and review process relative to your client goals and not just the directional accuracy. If you can orient your accuracy against the third party reporting against where your client wants to go, it will help you get a little bit more specific on how to deliver that process, uh, against what your client's expectations are.

okay, but, but Roman, what, what if the pennies do add up? Sure. Great. That's fantastic. Over 99% of the time, they, they don't, and you're probably gonna be wasting labor on, on some of those edge cases. Well, well, but Roman, what if my client expects perfection? What, what if they are really detail oriented? Well.

Do they, they might be, they might be asking you really granular questions or do they really prefer fast, confident answers to help them make decisions? Like have you asked them what do they expect? I think we have this own bar that we put on top of the client's expectations without actually asking them the question where, where's the right bar for you and your business?

And, and honestly, coaching them on that. Where should that bar be for them? Now here, here's the, the hard truth. Reconciling to the penny makes you feel like you're in control, but feeling like you're in control doesn't really relate to like being valuable If you're in control, yet your client has differing expectations on what's actually valuable to them.

Like that's where you need to bridge the gap of communication wise. To ask the question of what drives value for your clients. Really, we just need to focus on what helps drive decisions, what help drives clarity, what help drives client trust. We can't be chasing those decimals. We need to start chasing insights.

I hope that's helpful to you. We're gonna dive more into topics like this as we continue to move forward in CAS minute and uh, I'm always happy to answer any questions on that topic and anything else in the CAS world. More next time.